Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us    
Amazon Great Indian Festival Celebration Sale - 2019
Industry News

| More

Revival in imported coal-based UMPPs drive 40% surge in Indian coal imports - Acuité Ratings

Posted On: 2019-08-29 23:46:52

100% FDI in coal mining expected to offset structural challenges in domestic supply

Acuité Ratings believes that a sharp increase in coal imports witnessed in the first quarter of the current fiscal reflect an improved tariff regime and better operating performance of the imported coal based power plants, a slowdown in production by Coal India as well as an uptick in power demand due to rapid electrification in the country. India's thermal coal imports have jumped by 41% YoY to 18.4 million tonnes (mt) from 13.0 million tonnes during Q1 FY20, despite the slowdown in the economy witnessed over the last two quarters. The key driver for the spike is the pickup in imports by private sector power plants, particularly a few ultra- mega power plants (UMPPs) which have been benefitted from an improved tariff regime that permitted a pass through of increased generation costs despite a competitively bid initial framework. Further, the domestic coal industry continues to be plagued by challenges in supply infrastructure with production in Coal India (CIL) having grown at a mere 0.1% in Q1. Lastly but not the least, electricity generation has actually grown at a healthy rate of 7.4% in the first quarter with a steady progress in power transmission and distribution infrastructure across the country. Acuité is of the opinion that the government's decision to permit 100% FDI via automatic route in coal mining and allied activities will facilitate higher investments in the sector and arrest the increasing dependence on coal imports over the medium term.

A study by Acuité Ratings indicates that coal imports by private sector IPPs have leapfrogged to 14.5 million tonnes from 10.3 million tonnes i.e. over 40%* yoy in April-June 2019. With limited domestic coal linkages, the bulk of India's coal imports (79% as in Q1) are undertaken by the IPPs. Many of the private thermal power plants are configured to use imported or blended coal in their generation process; but such a sharp increase has been primarily due to a quantum jump in imports by two UMPPs of Adani Power and Tata Power. While Adani's Mundra unit imported 4.5 million tonnes representing a multi-fold growth, Tata Power's unit in Mundra imported 3.0 million tonnes of coal, also a strong 38% growth yoy. Another IPP that accounted for significant imports was JSW Energy's Ratnagiri unit importing 1 million tonnes of coal.

The imported coal-based private generation units have ramped up their generation and coal imports following the Supreme Court's directive in October 2018, which facilitated the pass on of increased generation costs to consumers. The beleaguered UMPPs located in Mundra had been struggling with lower PLFs (plant load factor) over the past few years owing to low tariffs and under recoveries. These power plants were forced to cut imports and stop or reduce power generation after the court, in its earlier order in 2016, had barred them from passing on increased import costs to end consumers, after their coal supplies from Indonesia became more expensive due to the imposition of a new pricing mechanism.

Globally, the coal prices have been on a downtrend with the headwinds of slowdown in both developed and emerging economies. The benchmark prices of thermal coal (Indonesia, 4200 kcal/kg) has dropped by 16% over the period July-June 2019, rendering imported coal relatively attractive.

Crippling domestic fuel supply coupled with bottlenecks in transport infrastructure have been the key issues that have continued to hamper coal production in India. Domestic production during the first quarter of the current fiscal has been particularly stagnant, supporting imports. The coal production of CIL and its subsidiaries during Q1 FY20 stood at 137 million tonnes, a meagre 0.1% growth year-on-year. Over the years, there has been a consistent effort taken by the government to increase domestic coal production and reduce dependence on imported coal at least for the power sector. Notwithstanding these efforts, production by CIL has regularly missed its target by a wide margin except in the previous year where it almost managed to reach its target.

The structural weaknesses in domestic coal supply is also leading to rising imports by the state and central generation companies. Acuité believes that supply bottlenecks coupled with the high load period during the summer and the pre-election months have led PSUs to opt for imported coal. For example, Mahagenco (Maharashtra) faced coal supply crunch in the second quarter of FY19; its Koradi and Chandrapur power plants had witnessed a significant reduction in generation during the said period despite the fact that they constitute more than half of the state's public sector installed capacity. Subsequently, the state resorted to imports in order to push up the generation levels of Mahagenco; it imported 1.04 million tonnes of coal in Q1 against no imports during the corresponding period of last year and generated 13.8 billion units in Q1FY20 as compared to 12.2 billion units in Q4FY19, a 13% growth quarter-on-quarter. Even from the central sector, NTPC-the country's largest electricity generator, imported 1.1 million tonnes in Q1 as compared to an almost negligible amount in the previous year.

In order to boost domestic coal production, there has been an urgent requirement for reforms relating to prioritising efficient coal linkages and its delivery and promoting competition in the sector by way of allowing commercial mining through entry of private and foreign firms. The sector continues to face production and expansion problems involving the requisite forest and environmental clearances, frequent labour strikes and rehabilitation of affected people. In this context, the decision to facilitate 100% FDI in the coal mining sector is significant; however, Acuité believes that the shortfalls in domestic coal production are likely to continue at least over the medium term.

According to the 19th Electric Power Survey (EPS) report, electrical energy requirement till FY22 is expected to grow at a CAGR of 6.18%. The healthy growth in demand is likely to be supported by several policy initiatives of government such as Power for All (PFA) providing 24x7 power to all Indian households, industrial and commercial demand, adequate supply of power to agricultural consumers, dedicated freight corridors, 'Make In India' initiative and rising trend towards electric vehicles (EVs). As per CEA, power demand has grown at a healthy 7.4% YoY in Q1 FY20. While the contribution from renewable sources are on a rise, India will continue to have a predominantly coal-based energy mix at least in the medium term and quick reform measures in the coal sector is more critical today than ever before.

Source: Equity Bulls

Click here to send ur comments or to

Other Headlines:

Afghanistan Trade Event Drives Over $55 million in New Business

InstantPay granted Corporate Agency license by IRDA

ICAI and ICAEW renew qualification reciprocity agreement

Implementation of Uniform Banking Hours in all Public Sector Banks (PSBs) on PAN India

No more 'Single Use Plastic', says Usha International

Chennai Machine Tool Expo 2019 Brings Technologies to the Doorsteps of Tamil Nadu

Affordable homes account for over 48% unsold units in MMR: PropTiger report

PaisaWapas announces special cashback for Amazon and Flipkart festive sale

Mitsubishi Electric India pledges for a greener tomorrow in Nagpur

Cognizant Named an AI Consultancy Leader by Independent Research Firm

Tata AIA Life Insurance goes from protecting people's future to protecting the environment too

New Cognizant AI Insurance Claims Platform Enhances Processing, Accuracy and Customer Service Following Natural Disasters

Chennai Machine Tool Expo 2019 to Set the Ball Rolling for Manufacturing Excellence

Truecaller appoints Hitesh Raj Bhagat as Director of Corporate Communications India

Universal Sompo General Insurance Company Ltd launches USGI ALLy mobile application

Cinépolis lets you #XperienceTheFuture with its latest campaign

Logitech partners with LXG to strengthen the esports ecosystem in India

PAYBACK joins hands with Cricketer, Yuvraj Singh to launch its new campaign 'PAYBACK Chalao'

Indian tourism evolving as a catalyst of growth and employment generation

House of Hiranandani celebrates the Heroes of Hiranandani this Engineer's day

Flora Haixia Zhao joins Sterlite Power as an Independent Director

OPPO's 20x Zoom powerhouse, Reno2, to go on sale across India

World's Biggest Food Exhibition - SIAL Kicks off Today in Delhi

JSW Cement launches Durga Puja campaigns with a social focus

Globus Infocom Launches Indoor LED Display Wall at InfoComm India 2019 Expo

Cash Suvidha plans to raise $5-10mn equity funds

EaseMyTrip Brings 'Welcome Festive Sale' Campaign

Logitech Announces Launch of Logitech® Pebble Wireless Mouse M350

JRK Group launches Mobile Application for easy investment in shares and mutual funds

'Cordless Matlab Bosch' - Introducing Experiential Mobile Vans to Unveil the Power of Cordless

Duroflex introduces India's only certified orthopaedic mattress range

Signify illuminates Qutub Minar with warm white LED's

Now every qualifying SanDisk® product purchase could win you gold

Red Velvet takes to the skies on its first commercial service to New York City

DLF Shopping Malls win top awards at the 10th anniversary celebration of CMO Asia Awards 2019

Odisha delegation at Indian Business and Innovation Summit, Singapore.

GRUBOX, a unique unmanned retail startup, spreading its wings at national capital region

Phylion rolls out 10 million LEV Lithium-ion Battery Packs

RED FM's 'South Side Story' takes Delhiites on a magical Southern ride!

Signify celebrates Ganesh Chaturthi by illuminating Ganpati Pandal with 4,000 LED bulbs in Mumbai

RAK Ceramics inaugurates its New Orientation Centre in Gurugram

Cinépolis hosted a special tribute for teachers

TAFE's free of cost tractor rental platform - 'JFarm Services' launched in Gujarat

HubSpot launches redesigned App Marketplace for growing businesses

BT to deliver cyber security services for ICARE

Visit of Invest Odisha delegation to Guangzhou, China raises 36 Million Dollars from EST Group

Bharti Foundation partners with OpenLinks Foundation to launch tickLinks 2.0 mobile App for teachers

Poly Introduces G7500, a Meeting Room Solution Designed for Modern Indian Workplaces

1200 MW Annupur Thermal power project achieves 90% availability till date in the current financial year

Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2019